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Microeconomics
The branch of economics that studies individual units such as consumers and businesses.
Ad valorem tax
A tax whose amount is based on the value of a transaction.
Allocative efficiency
A state in which suppliers are producing the optimal mix of goods and services required by consumers.
Asymmetric information
A market failure in which one party in a transaction possesses more knowledge of the transacted product than the other party.
Average product
An output that is produced on average by each unit of the variable production factor.
Average revenue
The revenue a firm receives per unit of sales.
Average total costs
Costs per unit of output.
Barriers to entry
Ways of preventing entry of a company to the industry.
Branding
A process in which a company develops a name, term, sign, symbol, design or any other feature that allows consumers to identify the goods and services of a business.
Break even price
The price at which a firm is able to make normal profit (zero economic profit) in the long run.
Cap and trading schemes
Government-mandated, market-based approach to controlling pollution by providing economic incentives for emissions reductions.
Carbon tax
A tax on fossil fuels intended to reduce the emission of carbon dioxide.
Cartel
A group of firms making price arrangements.
Ceteris paribus
Latin expression meaning ‘when all else remains equal’.
Collusion
The collaboration of firms to charge the same price.
Common access resources
Resources that everyone has access to, making it hard to exclude people from using them.
Community surplus
Total welfare created in the economy; the sum of consumer and producer surplus.
Complementary good
A good that is consumed along with another good.
Concentration ratio
A measure of the percentage market share in an industry held by the largest firms within that industry.
Consumer surplus
The extra satisfaction gained by consumers from paying a price lower than what they were prepared to pay.
Corporate social responsibility (CSR)
The responsibility that a business has towards all stakeholders in which it follows ethical guidelines.
Cross price elasticity of demand
A measure for the effect a change in price of one product has on the demand for another product.
Diminishing returns
A phenomenon in which the addition of a variable input results in smaller increases in output.
Demand curve
A curve showing how the demand for a commodity or service varies with changes in its price.
Demerit goods
Goods whose consumption has negative consequences on society.
Differentiated products
Products that do not have perfect substitutes.
Diseconomies of scale
A situation where long-term average costs of production increase as the scale of operations increases.
Economic cost
The opportunity cost of all resources employed by the firm.
Economic profit
A situation where total revenues exceed total costs.
Economies of scale
When output increases due to the ability to sell to a larger market, reducing costs per unit.
Elastic demand
The percent change in demand is more than the percent change in price.
Equilibrium price
The market price where the quantity of goods supplied equals the quantity of goods demanded.
Marginal costs
The increase in total cost when producing one more unit of output.
Producer surplus
The excess of actual earnings that a producer makes from a given quantity of output above what they are willing to accept.
Public goods
Goods that one individual can consume without reducing availability to another individual.
Price discrimination
The practice of charging different prices to different groups of consumers for the same product.
Supply curve
A curve showing the relationship between the price of a good and the quantity supplied.
Substitute good
A good that is consumed instead of another good.
Tariff
A tax charged on imported goods.
Wage
A payment for work performed by the workforce.
